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Senomyx, Inc (NASDAQ:SNMX)

Q3 2011 Earnings Call

October 27, 2011 11:00 am ET

Executives

Gwen Rosenberg - VP, IR and Corporate Communications

Kent Snyder - CEO & Chairman

John Poyhonen - President & COO

Tony Rogers - VP & CFO

Analysts

Scott Henry - Roth Capital

Jonathan Feeney - Janney Capital Markets

Operator

Good morning. We will now begin the Senomyx Third Quarter 2011 Conference Call. At this time, I would like to inform you that this conference call is being recorded and that all participants are in a listen-only mode. At the request of the Company, we will open up the conference for questions-and-answers after the presentation.

(Operator Instructions) I would now like to turn the call over to Gwen Rosenberg, Senomyx’s Vice President of Investor Relations and Corporate Communications.

Gwen Rosenberg

Good morning, and welcome to the Senomyx third quarter 2011 earnings and corporate update conference call. Participating in this call from Senomyx will be Kent Snyder, Chief Executive Officer; John Poyhonen, President and Chief Operating Officer; Tony Rogers, Vice President and Chief Financial Officer; Don Karanewsky, Senior Vice President, Discovery and Chief Scientific Officer and Sharon Wicker, Senior Vice President and Chief Commercial Development Officer.

Before we begin, please note that during the course of this call, we may make projections or other forward-looking statements regarding future events or financial performance of the Company that involves risks and uncertainties. The company’s actual results may differ materially from the projections described in the press release and in this conference call.

Factors that might cause such a difference include, but that are not limited to, those discussed in our quarterly and annual reports filed with the SEC. Copies of these documents are available upon request from Investor Relations at Senomyx or may be accessed via our website at www.senomyx.com.

I’d now like to turn the discussion over to Kent Snyder, CEO of Senomyx.

Kent Snyder

Thank you, Gwen. Good morning to everyone, and thank you for joining the Senomyx management team for our conference call and webcast. During this call, we’ll provide you with a general business and financial update for the third quarter of 2011, and this will be followed by a question-and-answer session.

During the past quarter, Senomyx has continued to make important strides both on the commercial and discovery and development fronts. As John will discuss in more detail later in the call, we are very encouraged by Firmenich’s progress and their commitment regarding their commercialization activities for our S6973 sucrose enhancer. S6973 is a unique ingredient that allows sucrose to be reduced in numerous products by up to 50% while maintaining the desired taste of natural sugar.

We are excited that major food and beverage companies have achieved positive consumer acceptance of testing results with products that contain S6973. Firmenich has been notified of client’s plans to launch reformulated established brands that incorporate S6973 in North and South America starting in the first quarter of 2012, and we expect continued launches throughout the year.

We’re also pleased with Firmenich’s marketing activities with Senomyx’s S2383 Sucrose Enhancer. S2383 can be used to enable up to a 75% reduction in the concentration of the artificial sweetener Sucralose in foods and beverages with improved taste characteristics and some applications. Client feedback from top chef companies regarding S2383 continues to be positive and Firmenich has expanded the geographic scope of their commercialization effort from North America into Latin America.

Following John’s remarks, Tony will provide a financial update. I would like to note that consistent with their first and second quarters of the year, during the third quarter, Senomyx’s realized improved financial results from operations compared to 2010.

Very importantly for Senomyx’s as our partners are increasing their commercialization activities for our current flavor ingredients, we are continuing to be build a deep, longer-term pipeline of new ingredients with unique advantages. We are very focused on being a leader in the discovery and development of new flavor ingredients that address the challenges facing the food and beverage industry, such as improving the nutritional profile to their products, applying innovation that will lead to competitive advantages in the marketplace and keeping costs under control in an environment where commodity prices are increasing.

I am going to spend some time now describing a few of our recent discovery and development accomplishments starting with notable achievements in our Sweet Taste Program. The primary goal for this program is to add to the company’s portfolio of new flavor ingredients that will allow a significant reduction of sweeteners in food and beverage products while maintaining the desired sweet taste.

We have realized a new and very important advancement toward [physical] with discovery of enhancers of high fructose corn syrup which is also known HFCF. Tasters have demonstrated our new enhancers could enable up to a 33% reduction of HFCF in certain product applications. High fructose corn syrup has the same number of calories as sugar and a 33% reduction is a very meaningful effect.

HFCF is a widely used sweetener with a worldwide market of approximately $6.3 billion. According to the USDA high fructose corn syrup accounts for approximately 37% of all caloric sweeteners consumed in the US. It is used in products such as baked goods, yogurts, sauces and condiments, beverages and concentrates, granola and energy bars and canned and frozen fruits.

Reducing HFCF in products without altering taste would be very beneficial for consumers and manufacturers. The new discovery of new HFCF enhancers further strengthens our Sweet Taste Program product portfolio. We look forward to keeping informed of our progress as we continue our discovery and development efforts that conduct a taste test and additional valuation.

Also regarding the Sweet Taste Program, as we discussed on our last earnings call, Senomyx is conducting development activities S9632, a potent new sucrose enhancer. The development activities are intended to support future regulatory filings for S9632 in the US and elsewhere.

Tasters have shown that S9632 can allow reduction of up to 50% of the sugar in a variety of product prototypes. S9632 has no sweetness of its own at the intended use level. So, there are no artificial or lingering tastes and the products retain the taste of natural sugar. We’re very optimistic about S9632 and its commercial potential. S9632 has very favorable taste and physical characteristics that are beneficial for a broad range of beverages and foods. We expect its usage in market place to be complementary to that of S6973, our sucrose enhancer currently being marketed by Firmenich.

In addition to our work with the sweet and taste enhancers, Senomyx’s activities to discover and develop natural high potency sweeteners continue to progress. These activities include further expansion of our natural products library and high-throughput screening of these plant-derived samples.

We have identified sample components that show significant activity in our proprietary screening assay and the individual components of interest have been scaled up for taste tests. We’re now preparing for initiation of taste tests which could lead to potentially promising natural non-caloric sweeteners. While still at an early stage, we’re very encouraged by the advances we’ve been making with our natural ingredients initiative.

Turning to our Savory Flavors Program, we’re pleased to announce today that Senomyx has expanded our Savory Flavor offerings with addition of S9229 and S5456, both of which have received Generally Recognized as Safe or GRAS regulatory determination. I would like to recognize the outstanding work of our scientific and regulatory teams whose efforts have provided Senomyx 10 flavor ingredients with GRAS status. These include our savory flavors, sucrose and sucralose enhancers and bitter blockers.

In each case we have been granted the GRAS designation for all of the uses and use levels requested. The GRAS status for S9229 and/or S5456 allows usage in a wide array of applications. These include snack foods, beverages, soups, seasoning and gravies and other category such as products with meat, poultry fish, milk and eggs. Unlike Senomyx’s GRAS sweet enhancers which have no inherent taste of their own, but are used to amplify the characteristics of a specific sweetener, each of our savory flavors provides a new savory taste sensation.

Test with product prototypes reveal that S5456 and S9229 operate savory flavor and temporal profile similar to monosodium glutamate which is also known as MSG at much lower concentration. Our new savory flavors could be used with a total replacement of MSG and products as well as a creation of new savory blend.

Senomyx Bitter Blockers Program has also added to our product pipeline. The primary goals of our Bitter Blockers Program are to reduce or block bitter taste and to improve the overall taste characteristics of foods, beverages and ingredients. As we’ve discussed previously two of our bitter blockers S6821 and S7958 have received GRAS regulatory determinations. The bitter blockers are effective in a wide variety of products and taste tests. For example taste tests using S6821 have been conducted with cocoa powder, whey protein, protein bars, caffeine, hydrolyzed soy protein, menthol and Rebaudioside-A which is also known stevia. In each case, the test panels determine that S6821 enabled a statistically significant reduction and bitterness.

S7958, which has similar functionality and alternative desirable physical properties, may be useful for those and other product applications. Two Senomyx collaborators have been conducting evaluations with bitter blockers in several products to determine potential commercial uses. We cannot name the collaborators at this time due to confidentiality considerations, but we will provide additional information about their activities when possible.

Our Cooling Flavors Program is also very promising. The goal of this program is to identify novel cooling flavors that do not have the limitations of currently available agents. Since retesting with a Senomyx cooling flavor has demonstrated that using a ten-fold lower concentration, the Senomyx flavor can provide the same cooling intensity as a leading commercial cooling agent.

Firmenich has exclusive commercialization rights for new flavors developed under the Cooling Flavors Program. Progress since last quarter includes Senomyx and Firmenich having completed initial evaluations of a candidate cooling flavor and product prototypes for use in specific applications. Based on positive results, safety profiling of this candidate has begun in preparation for potential development activities and support of regulatory filings.

Lastly, regarding our discovery and development efforts, our Salt Taste Program continues to be a high-priority for the company. The goal of this program is to identify flavor ingredients that allow a significant reduction of sodium in foods and beverages yet maintain the salty taste desirable to consumers.

Current activities include new more targeted analytical approaches to discover specific proteins that could be viable candidates for the receptors or co-factors responsible for salt taste. Senomyx has assembled a proprietary data base of proteins found in taste buds and progress is being exploring the role of a number of these proteins that may be involved in salt taste perception.

In summary, multiple Senomyx taste programs are yielding very favorable results. We are proud that since our last quarterly report, we have increased the number of GRAS designated offerings and we have conducted successful taste tests with potentially valuable new favor ingredients that have been validated by our partners.

We also continue to be diligent and seeking protection of our intellectual company. As of September 30, 2011, Senomyx is the owner or exclusive licensee of 260 issued patents and 700 pending patent applications related to proprietary taste receptor technologies in the U.S., Europe and elsewhere.

Technologies covered in our patents include taste receptor sequences and functions, screening assays, new flavor ingredients and product application. In addition to the patent, Senomyx maintains trade secrets and proprietary libraries of potential new ingredients.

I’ll now turn the discussion over to John Poyhonen, who will provide an update on commercialization and business activities. John?

John Poyhonen

Thank you, Kent. As mentioned earlier, Firmenich has generated significant interest in our S6973 sucrose enhancer with major food and beverage companies. As a reminder, Firmenich has exclusive worldwide rights to commercialize S6973 for virtually all food and specified beverage categories. Their initial focus has been on manufacturers of baked goods and GRAS approved beverages such as ready-to-drink and instant coffee and tea.

In addition, Firmenich has seen strong client interest in diary products including flavored milk beverages, yogurt and whiteners. The positive response from Firmenich’s clients is based on the ability of S6973 to enable a significant reduction of sucrose while maintaining sugar taste combined with potential cost of good savings.

Importantly, many of these food and beverage companies are focusing of S6973 in their large established brands. This is a very welcome situation that is not always the course of adoption of new ingredients. As we’ve seen with our savory flavors, companies often first use new ingredients and line extensions prior to reformulating recognized established brands.

Orders received for S6973 through the third quarter were to support product development, consumer acceptance testing, scale-up of the manufacturing process and other prelaunch activities. Based on positive consumer tests, clients of Firmenich plan to launch reformulated established brands that incorporate S6973 beginning in the first quarter of 2012 and continuing throughout the year.

We expect initial commercial scale orders for the launches to be received by Firmenich in the fourth quarter of this year and the first quarter of 2012. The commercial revenue for the initial launch quantities will therefore be recognized by Senomyx starting in 2012 and so we recognize royalty revenue one quarter in arrears.

Firmenich’s commercial approach has been to start initial S6973 evaluation with top tier food and beverage companies in order to develop product formulation solutions and build demand for commercial scale-ups of S6973.

Recently Firmenich’s initiated sales and product development efforts with additional clients to expand penetration and usage. We believe this is extremely important since the industry tends to be characterized by fast [followers] that will benefit from Firmenich’s in-depth experience with a variety of food and beverage categories.

A key driver for S6973 adoption is that caloric reduction is an imperative for many food and beverage companies. This is exemplified by projects such as the Healthy Weight Commitment Foundation, a CEO led multi-year effort designed to help reduce obesity in the US by 2015. The membership includes more than 180 retailers, food and beverage manufacturers, restaurants and other organizations.

Approximately 20% to 25% of the volume of the American food supplies provided by Foundation members -- with the rest provided by competing food manufacturers and restaurants. Companies participating in this coalition are committed to making it easier for consumers to manage their calorie intake. Specific options cited by the foundation include product reformulation and the use of the innovation to introduce lower calorie options.

We believe this type of commitment is significant for Firmenich’s marketing efforts with S6973. Firmenich also has exclusive worldwide rights to market S2383 Senomyx’s extremely effective enhancer of the high-intensity sweetener Sucralose, as either a standalone ingredient or part of a flavor system. S2383 may allow manufacturers to decrease their costs while improving the taste of numerous products. S2383 is applicable for use in all food and beverage product categories including baked goods, cereals, desserts, dairy products, confectionaries and a wide variety of beverages.

As Kent discussed -- products incorporating S2383 are being marketed in North America and Firmenich has received orders to support additional product introductions in Latin America. In addition, Firmenich is working with other clients that are conducting evaluations of S2383 for a number of product lines.

I’d also like to note that Senomyx is pursuing regulatory approvals for both S2383 and S6973 in countries that do not accept the grant designation. Also in the queue for the evaluation by the Joint Expert Committee on Food Additives also known as JECFA; JECFA is administered by the Food and Agricultural Organization and the World Health Organization of the United Nations. A positive determination by JECFA facilitates the acceptance or approval of flavors for use in food and beverages in many countries throughout the world with the primary exceptions being the EU, China and Japan.

We expect that S2383 and S6973 will be reviewed by JECFA during the summer of 2012. In addition, we are pursuing EU approval through the European Food Safety Authority or EFSA process, although the specific timing is difficult to determine based on the delays we’ve previously described regarding publications of the union list.

In other commercialization updates, Nestle the world’s largest food and beverage company is continuing its market efforts with products that incorporate Senomyx’s Savory Flavor. These flavors are intended to reduce or replace added MSG in foods.

Nestlé is currently marketing both new and reformulated established products that contain this flavor ingredient. Ongoing commercialization activities include launches of new and reformulated products that contain our Savory Flavors in countries in Asia, Latin America, Africa and the Middle East. Nestlé has expanded its marketing efforts into additional countries in these regions during 2011.

As we have discussed previously, EFSA has provided a favorable opinion for Senomyx’s S336 and S807 savory flavors, which means that no further evaluation is required. Final regulatory approval and commercialization in the European Union is contingent upon the ingredients being included in the EFSA Union Lists of Flavoring Substances.

As announced last quarter Senomyx’s regulatory advisors are confident that both S336 and S807 are included on the Union List. Timing for the publication of the Union List however still remains uncertain.

Importantly approval to use Senomyx’s Savory Flavors in Europe will create a new market opportunity for Nestlé. Ajinomoto, a leading global manufacturer of food and culinary products has launched products that contain the Senomyx’s flavor ingredient in several regions including China, North America and most recently in emerging country with large growth potential.

Ajinomoto has continued to expand a number of product offerings as well as their customer base in these important markets during 2001.

As Kent discussed, we are very pleased to have received grant status for two new savory flavors S9229 and S5456 which can be used to replace MSG or create new savory blends. In the worldwide MSG sales which are primarily in Asia are approximately $5 billion and there are additional markets for other savory offerings. S9229 and S5456 represent new opportunities for Senoymx. With S9229 Senoymx has complete freedom to operate since none of our partners have any right to this new ingredient.

One existing partner has rights to S5456 within Asia in a limited number of product categories, but we retain all other rights in the rest of the world. Senoymx is currently exploring commercialization options for S9229 and S5456 with the goal of maximizing revenue for the company.

Lastly, our bitter blockers are another important source of revenue for the company in addition to the two partners that are conducting assessments of S6821 bitter blocker for possible future commercialization, we continue to pursue new opportunities based on the demonstrated activity of S6821 to reduce bitterness in a wide range of products and ingredients.

This completes my update. Tony Rogers, Senoymx’s CFO will provide the financial overview of the company. Tony?

Tony Rogers

Thank you, John. Total revenues were $7.1 million for the three months ended September 30, 2011 compared to $5.8 million for the three months ended September 30, 2010 an increase of 22%. Revenues were $22.8 million for the nine months ended September 30, 2011 compared to $19.2 million for the same period in 2010, an increase of 19%. Included in revenues were commercial revenues of $689,000 for the third quarter of 2011 compared to $347,000 for the third quarter 2010, an increase of 99%.

Commercial revenues were $2.3 million for the nine months ended September 30, 2011 compared to $1.5 million for the same period in 2010, an increase of 51%. The increases in total revenues for the third quarter and the year-to-date were primarily due to net increases in revenue associated with our Sweet Taste Program collaborations.

Research and development expenses including stock-based expense were $7 million for the third quarter of 2011, compared to $6.5 million for the third quarter of 2010, an increase of 7%. Research and development expenses including stock-based expense were $21.6 million for the nine months ended September 30, 2011 compared to $20 million for the nine months ended September 30, 2010, an increase of 8%.

These increases were primarily due to increased costs for personnel-related expenses and research and development supplies. These were partially offset by decreases in expenses for outsourced activities. General and administrative expenses including stock-based expense were $2.8 million for the third quarter of 2011 compared to $3.1 million for the third quarter of 2010, a decrease of 9%.

General and administrative expenses including stock-based expense were $8.3 million for the nine months ended September 30, 2011 compared to $9.5 million for the nine months ended September 30, 2010, a decrease of 12%. The decreases were primarily attributable to decreases in payroll and related expenses and stock-based expense.

The net loss for the third quarter of 2011 improved to $0.07 per share, compared to a net loss of $0.10 per share for the third quarter of 2010. The net loss for the nine months ended September 30, 2011 improved to $0.18 per share, compared to $0.27 per share for the same period in 2010.

As we are nearing the end of 2011, we have better visibility into our projected annual financial results. We continue to anticipate that total 2011 revenue will be within our previously provided guidance. Though we’re nearing the guidance range, we’re also forecasting that our expenses for the year will be lower than anticipated and our yearend cash balance will be at least $3 million higher than previously projected.

For the full year 2011, Senomyx expects total revenues of $30 million to $32 million, total expenses of $40 million to $41 million of which approximately $5 million is non-cash, stock-based expense, net loss of $8 million to $10 million basic and diluted net loss of $0.21 to $0.26 per share and a yearend cash, cash equivalents and investments available for sale balance greater than $53 million.

Our 2011 revenue will continue to be primarily comprised of development revenue and we anticipate that $3 million to $4 million of total revenue will be commercial revenue. As anticipated, the majority of commercial revenue will be based on products from our Savory Program. 2011 commercial revenue will only reflect initial sales of 2383 and 6973 through the end of the third quarter as royalties on Firmenich product sales are recorded on our books, one quarter in arrears.

As John discussed, S2383 and S6973 continue to gain traction in the marketplace and we expect that our commercial revenues will continue to grow (inaudible) of the extended adoption of these products in the marketplace.

With respect to the status of our cash balance, we ended the quarter with $59.1 million in cash, cash equivalents and investments available for sale. In addition to the cash in our balance sheet as of the end of the September, we have over $26 million, a future research and development cash payments committed by our collaborators.

We also have approximately $26 million in potential payments associated with collaborators extension options and another $27 million in potential milestone payments. Considering our current cash balance, our collaborative funding commitments as well as the anticipated future growth of our commercial revenue from our various GRAS approved products, our balance sheet remains healthy and we’re well positioned to continue to advance our programs toward commercialization.

I will now turn the call back over to the operator to open it up for questions.

Operator

(Operator Instructions) Your first question comes from Scott Henry of Roth Capital.

Scott Henry - Roth Capital

I admit I did miss the first 10 minutes of the call, so I apologize of any of these questions have already been asked. But it sounds like there’s a lot of good things going on in the pipeline, I did want to get a little more granularity on the commercial revenues, I mean the past couple quarters have been flat at around 675,000 to 700,000. I am wondering when should we look for an inflection point of those growing. I mean I guess should we start to see sequential quarter-to-quarter growth starting in Q4 or is that more of a 2012 event?

John Poyhonen

I think that it is a very good question, something we spent a lot of time talking with our partners about and modeling internally. I think that realistically we are really looking at 2012 to start seeing significant growth in our commercial revenues and the key driver of that will be F6973. That’s when the first commercial launches of F6973 will occur by Firmenich clients in established brands that have been reformulated and the orders of F6973 from an ingredient perspective will be received in the fourth quarter of this year and beginning into 2012.

And as reminder that any orders that we receive or that Firmenich receives in the fourth quarter this year would not be recognized in until 2012 based on the accounting treatment of one quarter in arrears. I think one of the other things that’s probably worth mentioning is that with our savory flavor and that’s what you are primarily seeing for commercial revenues this year, they started off slower and more line extensions that have grew into established products and continue along that path.

We are very encouraged about as a company as with F6973 we are seeing major food and beverage companies that are looking to put those in well established brands at the very beginning and as you might imagine that takes a little more time to make sure that you are doing all the diligence and consumer acceptance work that needs to be done in order to put it into a large brand.

Scott Henry - Roth Capital

Okay now you did mention the orders coming in on F6973 that should be in Q4 of 2011 and Q1 in 2012, could you give any sort of color into how should we think about those orders, what degrees of magnitude should we think about just any sort of color that would give us an idea of how large these orders may be perhaps relative to your current run rate, are we talking about a doubling over your current run rate or, you know, how should we think about that?

Kent Snyder

Yeah, it’s a really good question Scott, and as we formulate our 2012 budget under our long-range plan, we would provide updates to that. We’re having very detailed conversations with all of our partners and we’ll be deciding guidance for 2012, probably in the February timeframe.

Scott Henry - Roth Capital

Okay, that’s helpful. And you mentioned that the expenses are coming in lower than expected. Why is that? I mean what are the leverage of main expenses come in lower, is it just coming in under budget or are there any kind of fundamental changes?

Tony Rogers

Yeah, there is no fundamental change. But just generally, primarily due to anticipated expenses for outsourced R&D activities and consumables used in our labs as well as lower depreciation expenses. So those are the key drivers against our projections at the beginning of the year.

Scott Henry - Roth Capital

Okay. Just finishing it up here, I’ve got two questions left. The new GRAS products 9229 and 5456, what would be your timeline to try to partner those? Generally, how long does it take between receiving GRAS status and finding a partnership?

Kent Snyder

Scott, I think, it’s important to note as John said that we’re currently looking at how best to commercialize those two savory flavor ingredients and obviously our goal is to maximize revenue to Senomyx. So we want to take our time and come up with the best formula for commercial activities for the two savory flavor ingredients. So in terms of putting a timeline on potential partnerships I think it’s a little bit premature to comment on that at this point.

Scott Henry - Roth Capital

Okay. And then I guess the final question, obviously a big part of your business is the deal with Pepsi, I know its still relatively recent, but any developments over the past three months that we should be aware of anything going on there that you care to share at this point or just steady progress; how should we think about that deal?

Kent Snyder

The relationship remains very, very strong and I think the comments that we made regarding developments on the Sweet Taste Program you know kind of all reflect those activities that we’re carrying out on behalf of PepsiCo. So some of that you may have missed in my initial comments and we’re happy to fill you in kind of what's going on may be in fact you want to check back with us after the call.

Operator

Your next question comes from the line of Jonathan Feeney of Janney Capital Markets. Jonathan your line is now open.

Jonathan Feeney - Janney Capital Markets

I wanted to, it’s just going to be a function of what you are comfortable saying, but I realize you have a lot of visibility to what your royalty pipeline is going to look like. And I am wondering what you see can tell us before February if anything about the order of magnitude to think about, you clearly see sequentially how much product is going out the door and you’re working with these partners and you see how much product is going into these new products you updated us on particularly through Firmenich. I am just kind of wondering, can you give us an order of magnitude or a way to think about sequentially how much more product has gone out the door or gone from your collaborators out to Firmenich’s customers?

John Poyhonen

Yeah, I think, John this is John, and I think the key to keep in mind what that is when we look at significant incremental commercial revenue it’s really being driven by our Sweet Taste Program of S2383 and S6973. I think we’re very encouraged that S2383 continues to grow in usage which is expanded through Firmenich’s efforts into Latin America now which is encouraging. That’s still working out on sucralose which is not the large opportunity with annual sales of sucralose under $400 million versus $100 billion sucrose market. So that’s where the huge opportunity really comes into play.

When we look at that John, I think that it’s a bit early. We are aware of certainly the clients that are moving forward and have made the decision to commercialize and Firmenich is waiting to receive those orders in the fourth quarter and the launch will occur by their clients in the first quarter. What’s hard to project now is there are many other client evaluations that are ongoing where they’re doing their own formulation, consumer acceptance, scale-up, costing all those types of things.

Jonathan Feeney - Janney Capital Markets

Now these are Firmenich’s clients you’re talking about, right?

John Poyhonen

Exactly, yeah, so I think it’s a bit premature to discuss this you know as I mentioned earlier, we are having detailed conversation with our partners on all commercialization plans for next year and beyond. But until we have those discussions and until the consumer acceptance and evaluations are completed by their clients, it would be a bit too early to talk about it. But as I mentioned earlier, I think what we’re most encouraged about is the fact that their clients are really looking at established existing brands based on you know significant reduction of sugar that can occur as well as you know the potential cost savings.

Jonathan Feeney - Janney Capital Markets

I mean in talking with Firmenich specifically about the sweet enhancers, what’s your sense of a pushback you know. Now what’s the pushback and it seems like a no brainer alright, I mean what’s the pushback you get it from they get and then you get in return from end customers?

John Poyhonen

I think that when you’re looking at companies that have spent decades building brands, they want to take their time in making decisions on any changes that would be made with those.

Jonathan Feeney - Janney Capital Markets

Sure.

John Poyhonen

So I think that’s probably the biggest pushback, but quite honestly, we’re seeing a lot of wins from their clients as they go out and test these. So you know I think it’s just being a bit conservative with the large brands that obviously these companies want to protect, but I think we’ll start to see momentum as the first few large companies start to launch and it grows from there.

Jonathan Feeney - Janney Capital Markets

Thanks. And another one question, S9632, this new sucrose enhancer is just like kind of thing that could trigger additional collaboration funding or is this like pre-existing milestones with some existing collaborator, can you clarify that?

Kent Snyder

You know the work we are doing on that particular sucrose enhancer has been part of the R&D activity that we have been deducting on behalf of Firmenich and Pepsi, so we’ve started development activities you know regarding that particular sucrose enhancer and assuming that our two partners would want to go along and join in on that particular sucrose enhancer, they essentially have all relevant categories tied up.

Jonathan Feeney - Janney Capital Markets

And I guess two others I guess more going into detail question, specifically about with all the volatility and commodities here, I mean our commodity is a big part of the sale process right now and I honestly don’t know what the price of sucralose has been doing, but I do know what the price of commodities broadly have been. Has that become a bigger part of the sale process for Firmenich or for anyone, any of your other major partners as far as utilizing these to commercialization.

John Poyhonen

It is an important question John and I think that the key driver continues to be especially with our sucrose enhancers reducing calories and improving the nutritional profile of products creating options for consumers. Commodities continue to be a huge issue, not only from a cost standpoint, but if you look at things like sustainability and the amounts of water that’s required to produce sucrose throughout the globe. Those are all the things that big companies are focusing on and all part of the selling proposition that Firmenich is using with their clients.

Jonathan Feeney - Janney Capital Markets

Okay. Just finally, just so I understand. You mentioned so, including the two new GRAS approved in the Savory portfolio, as far as GRAS approved you’ve got the two in sweet, two in bitter and the two new ones in Savory that you mentioned in the release. Where are the other four GRAS approved compounds?

John Poyhonen

Those, John, were the initial Savory Flavor ingredients that we moved to the GRAS process a couple of years ago.

Jonathan Feeney - Janney Capital Markets

Were those the Ajinomoto collaborative?

John Poyhonen

Yes. It’s part of the Ajinomoto and Nestlé collaborations.

Jonathan Feeney - Janney Capital Markets

Okay. So, all the other four and it is six total in Savory now?

John Poyhonen

Correct.

Operator

Your next question comes from [Justin Lewis] of Sidoti Company.

Unidentified Analyst

I was just wondering how big that MSG market is for the two savories, the two new ones, that is that a large portion of market, like how big?

Kent Snyder

Yes, so, if you look at the global sales of MSG, it’s estimated to be $5 billion. So, it’s a good sized market. Asia tends to be the dominant portion of where the market exists. But there is still like fairly good opportunities in the US and the EU where companies are looking to remove added MSG from their labeling.

Unidentified Analyst

And then I guess my other question would be, just could you shed some more light on the sodium progress?

Kent Snyder

Well, I think that the information that we provided during the call is a good summary of where we are at on that particular program. It continues to be challenging from a scientific standpoint, but we feel we’re making incremental progress but it’s really too early to comment on potential candidates for the receptor. We are optimistic that once we have the receptor identified that we can find enhancers. But other than what I commented on during the call, I think that's probably the only thing that we can say at this point in time.

Operator

Thank you. We have no further questions. I am going to turn the call back to Mr. Snyder.

Kent Snyder

Well, first of all thanks to all of you for participating today. To summarize, we at Senomyx are very excited about increasing our diverse portfolio of approved and prospective new flavor ingredients. All of our programs represent potential value drivers for the company.

As noted, our pipeline includes products in all stages of discovery and development. We have savory flavors, sucrose enhancer, a sucralose enhancer that are being commercialized by partners. We have the two new savory flavors and two bitter blockers that received GRAS regulatory status. We have a new sucrose enhancer that is subject to regulatory focused development activities. We have a new cooling flavor being assessed in initial safety studies.

We've identified new fructose enhancers that in taste tests have demonstrated ability to reduce by up to 33% the amount of HFCS while maintaining the sweetness. We’re preparing for taste tests for potential ingredients from our natural products and we’re making progress with our earlier stage Salt Taste discovery efforts.

So importantly for our shareholders, we believe our novel flavor ingredients could provide competitive benefits in the marketplace and then attractive mid to long-term royalty stream for the company. From a near-term financial perspective, our solid cash balance along with collaborative funding commitments allow us to continue to dedicate appropriate resources to our discovery and development activities. We also continue to work on possible new collaborative agreements related to our flavored programs.

This concludes our Update Call. We certainly appreciate your time and interest in Senomyx and if you do have additional questions, please feel free to contact us directly or through our website. Thank you very much.

Operator

Ladies and gentlemen, this concludes our conference call for today. All parties may now disconnect.

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